Working Paper: NBER ID: w18546
Authors: Klaus Desmet; Esteban Rossi-Hansberg
Abstract: We propose a dynamic spatial theory to analyze the geographic impact of climate change. Agricultural and manufacturing firms locate on a hemisphere. Trade across locations is costly, firms innovate, and technology diffuses over space. Energy used in production leads to emissions that contribute to the global stock of carbon in the atmosphere, which affects temperature. The rise in temperature differs across latitudes and sectors. We calibrate the model to analyze how climate change affects the spatial distribution of economic activity, trade, migration, growth, and welfare. We assess quantitatively the impact of migration and trade restrictions, energy taxes, and innovation subsidies.
Keywords: climate change; economic activity; migration; trade; spatial economics
JEL Codes: E00; F10; R00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in temperature due to climate change (Q54) | shift in ideal production locations for agriculture and manufacturing (O14) |
| rise in temperature (Q54) | productivity of agriculture is more sensitive to temperature changes compared to manufacturing (O49) |
| as temperatures rise (Q54) | northern regions will increasingly specialize in agriculture (N52) |
| southern regions will continue to focus on manufacturing (L60) | changes in comparative advantages (F11) |
| frictions associated with international trade and migration (F29) | exacerbate economic impacts of global warming (F69) |
| migration restrictions (F22) | heighten overall welfare costs associated with climate change (D69) |
| magnitude of frictions (F12) | economic effects of temperature change (F69) |